The Chinese March. President Tokayev Secures $16.54 Billion in Investments from Beijing
The official visit of Kazakhstan's President Kassym-Jomart Tokayev to China on October 17-18, 2023, proved to be immensely fruitful. During the visit, nearly thirty commercial documents and agreements were signed, with investment values estimated at $16.54 billion USD.
A significant portion of these funds is earmarked for the energy sector. Notably, joint ventures aren't merely limited to exploration and extraction but also extend to refining hydrocarbons into high-value-added products.
We have compiled details on the most critical agreements and understandings reached over the two days in Beijing in the domains of oil extraction, refining, and energy.
KazMunayGas - Sinopec
One of the most anticipated developments was the agreement finalizing the entry of the Chinese corporation, Sinopec, into a polyethylene production plant construction project in the Atyrau region. Kazakhstan had long struggled to implement this initiative on its own, encountering challenges in securing and retaining partners. That was until Sibur, a Russian company, joined the project. Initial agreements suggested that the Russians would own a 40% stake, but this was subsequently reduced to accommodate another partner, Sinopec.
On October 17 in Beijing, KMG sold a 20% stake in Sileno LLP (the "Polyethylene" project operator) to Sinopec. Concurrently, Sibur divested 10% of its stake in favor of Sinopec. As a result, the ownership structure of Sileno LLP now stands at: KMG with 40%, Sinopec with 30%, and Sibur with 30%.
The future plant will have a capacity of 1.25 million tons per year and will be located near an existing polypropylene production facility that KMG launched the previous year. The completion of all legal procedures related to Sinopec's entry into the "Polyethylene" project is slated for the first quarter of 2024. Investment decisions regarding the project are expected in 2024, with its current status being in the Extended Basic Design (EBD) phase.
Presently, licensing agreements for the "Polyethylene" project have been signed with global companies such as Chevron Phillips Chemical, Univation Technologies, and Axens. This will facilitate the production of a broad range of products, including premium grades of polyethylene in high demand worldwide. The finished product is planned for distribution in both domestic and export markets. Targeted sales markets include the CIS countries, Ukraine, Georgia, Turkmenistan, Europe, China, Southeast Asia, and Turkey.
The robust demand for polyethylene stems from its extensive applications in crafting numerous household and industrial goods. Examples include polyethylene pipes, construction and packaging materials, automotive components, and it's even used for the interior lining of spacecrafts.
The Russian petrochemical holding company SIBUR officially joined the Polyethylene project in March 2023.
On the same day, KazMunayGas and Sinopec inked another agreement, focusing on a joint preliminary feasibility study for the production of terephthalic acid and polyethylene terephthalate (PTA/PET) in Atyrau. The anticipated production capacity for the future facility is set at up to 735,000 tons of PET per year. Paraxylene, produced at the Atyrau Refinery, will serve as the primary raw material.
It's noteworthy that Sinopec Engineering had previously taken on a role as a strategic partner and general contractor in a turnkey project for the construction of an aromatics complex at the Atyrau Refinery.
PET is a significant polymer material with wide-ranging applications across various sectors. It's extensively used in the packaging of food and beverages, containers, the textile industry (textile yarns, synthetic fibers), technical fibers, and more. The terephthalic acid production facility acts as an intermediate step in the PET production chain.
Magzum Mirzagaliyev, the head of KMG, expressed confidence in the collaboration, stating, "I'm certain that our partnership with Sinopec, a global leader in petrochemistry, lays a strong foundation for success. It will positively impact the development of Kazakhstan's petrochemical industry and also mark a new chapter in the strategic partnership between our nations."